NRA opposes minimum wage increase based on CPI

Sept. 28, 2006

WASHINGTON D.C. — In November, voters in six states including Arizona, Colorado, Missouri, Montana, Nevada and Ohio will decide whether to raise their respective minimum wages based on annual increases driven by the Consumer Price Index (CPI).

According to a news release, economists estimate the CPI to increase approximately 3 percent per year, but in some cases it has risen as much as 14 percent.

"If approved, each of these states will set their minimum wage on autopilot for an annual increase whether the CPI is 3 percent or 13 percent," said Tom Foulkes, National Restaurant Association vice president for state relations. "This will overwhelm states like Montana where the CPI will be based on the cost of condos and cappuccinos in New York City, Los Angeles and Chicago."

The CPI increase will compound increased labor costs further to employers who pay minimum wage and employees in brackets directly above the minimum wage. Wage increases in the initiatives vary from $1 to $1.70. Taking the $1.70 figure, each minimum wage employee would receive a pay increase of $3,536.00 for 2007. Factor in wage compression of the gap between minimum wage employees and those making directly above minimum wage, and the $1.70 increase could affect employees making up to $10 an hour. If a business has 30 employees making wages between the minimum wage and $10 an hour, 2007 wage increases for that operation could be $106,080.

Except for Vermont, nearly every state legislature that has rejected minimum wage increases tied to the CPI. Ballot proposals in Colorado, Nevada and Ohio would set the CPI adjustment policy in the state constitution and leave legislators virtually powerless to make adjustments during bad economic times.

"Proponents have a bad track record passing CPI wage hikes legislatively, so they are now taking advantage of cluttered Election Day ballots and uninformed voters to pass this destructive policy," Foulkes said. "This will foster a very anti-business climate in each of these states, not just for those that pay minimum wage, but for all employers."